Giving a voice to the Voiceless

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I have bad credit and employers are refusing to hire me. Is that legal in California?

Unfortunately, almost half of all employers run credit checks on applicants. Many employers believe that having a good credit history shows a solid work ethic and a level of trustworthiness. Also, if there are many job applicants for one position, a credit check can be a good way to narrow down the field.

However, there is little evidence to show that having a good credit score means you are a good worker. The biggest reason that many people file for bankruptcy is medical debt, and huge medical bills can happen to almost anyone. For those individuals with bad credit scores, it can be hard to escape poverty if an employer refuses to hire because of a bad credit score.

Since 2007, 11 states have passed laws to ban or put limitations on employers running credit checks on job applicants. In California, employers are limited in the circumstances in which they can use credit reports in making employment decisions. Most employers are not allowed to pull credit reports.

The general rule in California is that an employer may not consider a person’s credit report in making job decisions except for employees in managerial positions, positions that involve access to more than $10,000, law enforcement positions, positions that involve access to private credit information, and positions with the state Department of Justice. If an employer in California does plan to check a credit report or if an employer plans to use the information in the report as the basis for a negative employment decision, the employer must give notice to the applicant.

A recent study has found that when a state has a law that prohibits employers from looking at an applicant’s credit score, blacks are more likely to be unemployed. In other words, if an employer is not allowed to look at a credit score, the employer is more likely to not hire blacks than if an employer was allowed to take a credit score into consideration.

The study found that when a state passed a credit-check ban, employment went up by about two to three percent in neighborhoods with low average credit scores. Neighborhoods with average credit scores saw employment fall about three percent. The research also found that when a state passed a credit-check ban, it attracted workers from other states – especially out-of-state workers from places where people normally had bad credit. The laws made it harder for people with bad credit to find jobs. The study also found that credit checks were mostly keeping people out of higher-paying jobs.

Another consequence of banning credit reports is that employers were likely to ask applicants to meet other requirements. For example, in cities where there were a lot of workers with bad credit scores, when a ban on checking credit scores went into effect employers were more likely to ask for a bachelor’s degree and require extra years of experience. It’s also possible that employers used racial stereotypes to screen candidates. The reason that unemployment among blacks went up when the use of credit scores in hiring was banned is unclear – it could be that employers were tougher on black candidates because they couldn’t verify their credit histories, or possibly black applicants could not meet the increased education and experience requirements that employers began demanding.

After this study, it’s unclear whether or not it is fair to prohibit employers from running credit checks on applicants – any time a prohibition such as this one is put on an employer, the employer will find another way to impose screening requirements on employees, whether fair or unfair.

One thing that is clear is that it is illegal for an employer to make an employment decision based on race. If you believe that you have been excluded from a job because of your race, you have the legal right to take action. Call the Oakland-San Francisco racial discrimination attorney at Liberty Law at 510-645-1000 or 415-896-1000. Our attorneys will provide you with a free consultation on your case. Call today to learn more or to schedule a consultation.